What is HARP 3.0?

Since HARP 2.0 opened the doors for more Americans to lower their interest rates and monthly payments through a refinance, homeowners have been waiting eagerly for news of a HARP 3.0 refinance mortgage from the federal government. During his tenure, President Obama encouraged congressional lawmakers to expand the program further. News and rumors of an upcoming enhancement to HARP persist, but it is hard to predict exactly what will happen and what it might look like.

To understand what HARP 3.0 could bring, it helps to understand where the program has been.

In 2006, the housing bubble burst. Overnight, home values plummeted, and millions of homeowners found they owed more on their home loans than what their properties were worth. Banks would not let them refinance due to their out-of-control loan-to-value (LTV) ratios. For example, a house purchased at $250,000 could be suddenly worth only $130,000, while the remaining loan amount might have still been $200,000—a discouragingly high LTV of 153%. This not only made these homeowners ineligible for traditional mortgage programs, it also saddled them with loans that threatened to drain their finances and drive them into foreclosure.

In 2009, at the height of this crisis, the federal government launched a series of efforts to help these individuals get back on their feet. Obama’s Making Home Affordable Program (MHA) aimed to help people in underwater mortgages. The Home Affordable Modification Program (HAMP) was designed to assist homeowners at risk of foreclosure. The Home Affordable Program, launched in 2009, made the Home Affordable Refinance Program (HARP) possible.

HARP was targeted specifically at those American homeowners who had managed to stay current on their monthly home loan payments but could not refinance into better, more manageable loans because of the discrepancy between the market value of their homes and their loan amounts. It did this by opening up refinancing to homeowners whose LTV was between 80% and 125%. This provided a welcome respite to American homeowners and has helped millions of them since its introduction.

But as the situation continued to worsen for homeowners with higher LTVs, the federal government realized that changes needed to be made to HARP. So they released HARP 2.0, which opened up refinances to borrowers with LTVs over 125%. Hundreds of thousands more Americans were suddenly able to refinance into loans with better rates and lower monthly payments.

In early 2009, seeing the success of HARP play out and trying to keep the momentum growing in the housing market, the Federal Housing Finance Agency (FHFA) extended the program through December 2015.

Since then, the FHFA has decided to extend the program again through December 2017.

The Latest Updates on HARP 3.0

Now, the big question is: Will the FHFA release HARP 3.0, a new version to address all of those homeowners who weren’t taken into consideration by HARP 1.0 and 2.0?

Currently, the FHFA is considering a new change to HARP—rumored to take effect in October 2017—that would open it up to homeowners beyond those whose loans closed on or before May 31, 2009. Other rumored changes would include:

Borrowers can use HARP multiple times.

If you’ve refinanced out of a HARP mortgage, you are still eligible to participate.

The minimum LTV for Fannie Mae borrowers would be 95%, and there would be no maximum LTV.

The minimum LTV for Freddie Mac borrowers would to 97%, and there would be no maximum LTV.

With so much momentum built behind HARP, this upcoming change to the program is likely to help even more homeowners recover from the housing crisis and regain control of their financial future.

To see if you qualify for a HARP 3.0 Loan, fill out our quick 1-minute form to have a Mortgage Advisor contact you.

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